M/s Silver Star Steels, Cochin V. ACIT, Ernakulam

ITA 333/COCH/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64966 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 24-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR
• Keywords: Unexplained cash credit; Additional evidence
• Section: 132

Judgement Text

1 ITA NO.332,333&334/COCH/2010 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO. 332, 333 & 334/COCH/2010 (ASSESSMENT YEARS 2005-06, 2006-07 & 2007-08) M/S SILVER STAR STEELS VS A.C.I.T., CENT.CIR.1 MUDICKAL P.O. ERNAKULAM PERUMBAVOOR PAN : ABBFS9097B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MATHEW JOSEPH RESPONDENT BY : SHRI M. ANILKUMAR DATE OF HEARING : 10-10-2012 DATE OF PRONOUNCEMENT : 16-11-2012 O R D E R PER N.R.S. GANESAN (JM) ALL THE THREE APPEALS OF THE TAXPAYER ARE DIRECTED AGAINST THE THREE DIFFERENT ORDERS OF COMMISSIONER OF INCOME-TAX(A)-I , KOCHI DATED 19-02- 2010 FOR THE ASSESSMENT YEARS 2005-06, 2006-07 AND 2007-08. AS ALL THE APPEALS ARISE OUT OF THE SEARCH CARRIED OUT U/S 132 OF THE ACT, THE SAME WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COM MON ORDER. 2 ITA NO.332,333&334/COCH/2010 2. LET US NOW TAKE APPEAL FOR ASSESSMENT YEAR 2005- 06. 3. THE ONLY ISSUE ARISES FOR CONSIDERATION IS ADDIT ION OF RS.7,50,000. SHRI MATHEW JOSEPH, THE LD.REPRESENTATIVE FOR THE TAXPAY ER SUBMITTED THAT THERE WAS A SEARCH IN THE RESIDENTIAL PREMISES OF S HRI C.A. ABDULKHADER, SHRI C.A. ABDUL SAMAD, AND SHRI C.A. ISMAIL ON 05-12-200 6. NOTICE U/S 153C WAS SERVED ON THE TAXPAYER. ACCORDING TO THE LD.REPRES ENTATIVE, THERE WAS AN AGREEMENT DATED 28-12-2004 FOUND DURING THE COURSE OF SEARCH OPERATION FOR PURCHASE OF SCRAP MATERIAL OF STERLING TILE WOR KS. THE TAXPAYER, AS PER THE AGREEMENT PAID RS.10 LAKHS TOWARDS ADVANCE. AS PER THE PRACTICE IN THIS LINE OF TRADE, THE TAXPAYER HAS PAID ONLY ITS SHARE OF RS.2,50,000 AFTER DRAWING THE AMOUNT FROM THE FIRM. SINCE THE TRANSA CTION WAS NOT CARRIED OUT EVEN THE ADVANCE AMOUNT OF RS.2,50,000 WAS RETU RNED IN THE YEAR 2006-07. THE OTHER THREE PERSONS ARE MR. SHAJUDH EEN, PROPRIETOR OF ARSA IRON TRADERS, MR. BADARUDHEEN, M/S ROYAL IRON TRADERS, AND SHRI SHAJAHAN, MUMTHAZ IRON TRADERS. SINCE THE TAXPAYER COULD NOT PRODUCE ANY BOOKS OF ACCOUNT, THE ASSESSING OFFICER FOUND THAT THERE WAS EVIDENCE OF WITHDRAWAL TO THE EXTENT OF RS.4,08,000. HOWEVER, THE TAXPAYER CLAIMED THAT HE HAS PAID ONLY RS.2,50,000. THEREFORE, HE M ADE ADDITION OF 3 ITA NO.332,333&334/COCH/2010 RS.7,50,000. ACCORDING TO THE LD.REPRESENTATIVE, W HEN THERE WAS AN EVIDENCE FOR WITHDRAWAL OF RS.4,08,000 IT HAS TO BE ALLOWED. FURTHERMORE, THERE WERE FOUR PERSONS, WHO AGREED TO PURCHASE THE AUCTION MATERIAL. THE TAXPAYER PAID ITS SHARE OF RS.2,50,000 AND THE OTHER THREE PERSONS PAID THEIR RESPECTIVE SHARES. THEREFORE, THERE IS NO QU ESTION OF ADDITION OF RS.7,50,000 IN THE CASE OF THE TAXPAYER. 4. ON THE CONTRARY, SHRI ANIL KUMAR, THE LD.DR SUBM ITTED THAT ON THE BASIS OF THE AGREEMENT DATED 28-12-2004 FOUND DURIN G THE COURSE OF SEARCH, THE ASSESSING OFFICER BY A LETTER DATED 13- 05-2008 ASKED THE TAXPAYER TO EXPLAIN THE DETAILS OF PAYMENT AND SOUR CE THEREOF. THOUGH THE TAXPAYER EXPLAINED THAT ITS SHARE WAS ONLY RS.7,50, 000 THE AGREEMENT SHOWED THE PAYMENT OF RS.10 LAKHS. IN THE ABSENCE OF ANY EVIDENCE, ACCORDING TO THE LD.REPRESENTATIVE, THE BALANCE OF RS.2,50,000 WAS ADDED AS INCOME OF THE TAXPAYER. ACCORDING TO THE LD.REPRES ENTATIVE, SINCE THE SOURCE FOR PAYMENT OF RS.7,50,000 WAS NOT EXPLAINED TO THE SATISFACTION OF THE ASSESSING OFFICER, THE SAME WAS ADDED AS INCOME OF THE TAXPAYER. 4 ITA NO.332,333&334/COCH/2010 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THERE WA S AN AGREEMENT DATED 28-12-2004 WHICH WAS FOUND DURING THE COURSE OF SEA RCH. THE TAXPAYER CLAIMED THAT THE PAYMENT OF RS.10 LAKHS AS DISCLOSE D IN THE AGREEMENT WAS MADE BY FOUR PERSONS. THE TAXPAYERS SHARE WAS RS. 2,50,000 AND OTHER THREE PERSONS WAS RS.2,50,000 EACH. THE COPY OF TH E AGREEMENT WAS NOT AVAILABLE ON RECORD. WHEN THE TAXPAYER CLAIMS THAT IN THIS LINE OF TRADE, WHEN FOUR PERSONS JOINED TOGETHER FOR PURCHASE OF AU CTION MATERIAL AND THE TAXPAYER HAS PAID ITS SHARE OF RS.2,50,000 THE ASSE SSING AUTHORITY IS BOUND TO EXAMINE WHETHER THE OTHER THREE PERSONS NAMED BY THE TAXPAYER HAS ALSO EQUALLY CONTRIBUTED IN PAYMENT OF THE AGREED A MOUNT OF RS.10 LAKHS AS DISCLOSED IN THE AGREEMENT. THE QUESTION OF PROVIN G GENUINENESS AND SOURCE OF PAYMENT WOULD COME ONLY WHEN THE ENTIRE A MOUNT OF RS.10,00,000 WAS PAID BY THE TAXPAYER. WHEN THE TA XPAYER CLAIMS THAT IT PAID ONLY RS.2,50,000 AND THE BALANCE OF RS.7,50,00 0 WAS PAID EQUALLY BY OTHER THREE PERSONS FOR PURCHASE OF RAW MATERIAL, T HE ASSESSING OFFICER IS DUTY BOUND TO EXAMINE AND BRING ON RECORD WHETHER T HE OTHER THREE PERSONS NAMED BY THE TAXPAYER HAD ALSO PARTICIPATED IN THE AUCTION AND PAID THEIR DUE SHARE AS CLAIMED BY THE TAXPAYER. T HE TAXING AUTHORITY HAS 5 ITA NO.332,333&334/COCH/2010 NOT MADE ANY SUCH ENQUIRY TO FIND OUT WHETHER THE A UCTION MATERIAL WAS PURCHASED BY THE TAXPAYER ALONE OR IT WAS AGREED AN D PURCHASED BY THE TAXPAYER ALONGWITH THE OTHER THREE PERSONS NAMED BY THE TAXPAYER. SINCE THE TAXING AUTHORITIES HAVE NOT EXAMINED THIS FACT, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE EXAM INED BY THE ASSESSING OFFICER AFRESH. ACCORDINGLY, THE ORDERS OF THE AUT HORITIES BELOW ARE SET ASIDE AND THE ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE ISSUE AFRESH AND FIND OUT WHETHER THE OTHER THREE PERSONS NAMED BY THE TAXPAYER HAVE ALSO CONTRIBUTED FOR PURCHASE OF THE AUCTIONED MATERIAL AS CLAIMED BY TH E TAXPAYER AND THEREAFTER DECIDE THE SAME IN ACCORDANCE WITH LAW A FTER PROVIDING REASONABLE OPPORTUNITY OF HEARING TO THE TAXPAYER. 6. NOW COMING TO APPEAL FOR ASSESSMENT YEAR 2006-07 THE ONLY ISSUE ARISES FOR CONSIDERATION IS ADDITION OF RS1,50,000. 7. SHRI MATHEW JOSEPH, THE LD.REPRESENTATIVE FOR TH E TAXPAYER SUBMITTED THAT A RECEIPT DATED 25-03-2006 WAS FOUND WHICH DISCLOSED THE PAYMENT OF RS.4,99,200 TO THE OFFICIAL RECEIVER. A CCORDING TO THE 6 ITA NO.332,333&334/COCH/2010 LD.REPRESENTATIVE, THE TAXPAYERS WIFE HAS TAKEN A LOAN OF RS.5 LAKHS ON 30- 12-2005 AND 11-02-2006. THIS MONEY WAS USED FOR MA KING PAYMENT TO THE OFFICIAL RECEIVER. THE ASSESSING OFFICER DISALLOWE D THE CLAIM OF THE TAXPAYER ON THE GROUND THAT THE RECEIPT CANNOT BE CO-RELATED TO THE DATE OF PAYMENT WHICH IS AT THE END OF THE YEAR. ADMITTEDLY, THE T AXPAYERS WIFE IS NOT AN INCOME-TAX PAYER AND THE BORROWAL OF LOAN AND MONEY RECEIVED FROM LI C ON MONEY BACK POLICY IS AVAILABLE WITH THE TAXPAYER S WIFE WHICH WAS USED FOR MAKING INVESTMENT OF RS.4,99,200. THEREFORE, T HE DISALLOWANCE OF RS.1,50,000 IS NOT CALLED FOR. 8. ON THE CONTRARY, SHRI ANIL KUMAR, THE LD.DR SUBM ITTED THAT THE TAXPAYER HAS NOT SUBMITTED ANY CASH FLOW STATEMENT OF HIS WIFE SO AS TO EXAMINE THE DEPLOYMENT OF FUNDS WHICH BELONGED TO H IS WIFE. THE TAXPAYER HAS NOT PRODUCED ANY MATERIAL TO SHOW THE AVAILABIL ITY OF THE FUNDS. THEREFORE, THE LOWER AUTHORITIES HAVE RIGHTLY DISAL LOWED THE CLAIM OF THE TAXPAYER. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE MATERIAL ON RECORD. THE DISPUTE IS ONLY WITH REGAR D TO ADDITION OF 7 ITA NO.332,333&334/COCH/2010 RS.1,50,000 TOWARDS TOTAL PAYMENT OF RS.4,99,200. THE BORROWAL OF LOAN TO THE EXTENT OF RS. 5 LAKHS BY THE TAXPAYERS WIFE AN D THE RECEIPT OF MONEY FROM LIC ON MONEY BACK POLICY IS NOT IN DISPUTE. W HEN THE LOAN WAS TAKEN FROM THE BANK AND THE MONEY RECEIVED FROM LIC ON MO NEY BACK POLICY IS AVAILABLE TO THE TAXPAYERS WIFE, THE SAME COULD HA VE BEEN USED FOR MAKING PAYMENT TO THE OFFICIAL RECEIVER. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE DISALLOWANCE OF R.1,50, 000 IS NOT CALLED FOR. ACCORDINGLY ORDERS OF LOWER AUTHORITIES ARE SET ASI DE AND THE ADDITION IS DELETED. 10. NOW COMING TO THE APPEAL FOR ASSESSMENT YEAR 20 07-08, THE FIRST GROUND OF APPEAL IS WITH REGARD TO ADDITION OF RS.3 ,49,000 AS UNEXPLAINED CREDIT. 11. SHRI MATHEW JOSEPH, THE LD.REPRESENTATIVE FOR T HE TAXPAYER SUBMITTED THAT OUT OF THE PAYMENT OF RS.4,99,200 TO THE OFFICIAL RECEIVER, RS.3,49,000 WAS PAID DURING THE YEAR UNDER CONSIDER ATION. ACCORDING TO THE LD.REPRESENTATIVE, DURING THE YEAR UNDER CONSIDERAT ION THE TAXPAYER HAS RECEIVED BACK RS.2,50,000 PAID TO STERLING STEEL WO RKS. THIS WAS ALSO USED 8 ITA NO.332,333&334/COCH/2010 FOR PAYMENT OF RS.3,49,000 TO THE OFFICIAL RECEIVER . THIS WAS SHOWN IN THE CASH FLOW STATEMENT, HOWEVER, INADVERTENTLY OMITTED TO TAKE THE SOURCE ON THE RECEIPT SIDE. ACCORDING TO THE LD.REPRESENTATI VE, THE RETURN OF RS.2,50,000 IS REFLECTED IN THE SEIZED RECORD, THER EFORE, THE SAME HAS TO BE REDUCED FROM UNEXPLAINED CREDIT. 12. ON THE CONTRARY, SHRI ANIL KUMAR, THE LD.DR SUB MITTED THAT THE TAXPAYER COULD NOT PRODUCE ANY RECEIPT BEFORE THE L OWER AUTHORITIES. IN THE ABSENCE OF ANY EVIDENCE, THE COMMISSIONER OF INCOME -TAX(A) HAS CONFIRMED THE ADDITION. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO PERUSED THE MATERIAL. THE TAXPAYER CLAIMS THAT SEIZED MATERIAL SHOWS THE RECEIPT OF RS.2.5 LAKHS FROM STERLING STEEL WORKS. IF THE SEI ZED MATERIAL SHOWS THE RECEIPT OF RS.2.5 LAKHS FROM STERLING STEEL WORKS, THE SAME HAS TO BE CONSIDERED IN THE PAYMENT MADE TO THE OFFICIAL RECE IVER. HOWEVER, THE CLAIM OF THE TAXPAYER WAS REJECTED BY THE COMMISSION ER OF INCOME-TAX(A) ON THE GROUND THAT THIS IS AN ADDITIONAL EVIDENCE F ILED BEFORE COMMISSIONER OF INCOME-TAX(A) IN VIOLATION OF RULE 46A OF IT RUL ES. WHEN THE TAXPAYER 9 ITA NO.332,333&334/COCH/2010 CLAIMS THAT THERE WAS AN EVIDENCE TO SHOW THAT HE R ECEIVED RS.2.5 LAKHS FROM STERLING STEEL WORKS AND THE SAME WAS AVAILABL E FOR MAKING THE PAYMENT, THE SAME NEEDS TO BE EXAMINED BY THE ASSES SING OFFICER. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES AR E SET ASIDE AND THE ASSESSING OFFICER SHALL EXAMINE THE CLAIM OF THE TA XPAYER IN THE LIGHT OF THE SEIZED MATERIAL AND OTHER DOCUMENTS THAT MAY BE PRO DUCED BY THE TAXPAYER AND THEREAFTER DECIDE THE SAME IN ACCORDAN CE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY TO THE TAXPAYER. 14. IN THE RESULT ITA NO.332 AND 334/COCH/2010 ARE ALLOWED FOR STATISTICAL PURPOSE AND ITA NO.333/COCH/2010 IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH NOVEMBER, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 16 TH NOVEMBER, 2012 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH